New York ranks as world’s most expensive city for the first time

Inflation, the war in Ukraine and continuing pandemic restrictions saw prices rocket by an average 8.1 per cent in the 172 major cities covered

Inflation, a war in Ukraine and knock-on effects from the pandemic has launched New York City and Singapore to jointly hold the title of the most expensive city in the world as the average cost of living is up 8.1 per cent in 2022.

This results from this year’s Worldwide Cost of Living Index, released by the Economist Intelligence Unit (EIU) on Thursday, mark the first time that the Big Apple has topped the list, as Tel Aviv – 2021’s most expensive city – fell to the number three spot.

Los Angeles and Hong Kong respectively flushed out the rest of the list’s top five spots, while San Francisco moved into the top ten in the survey that compares the prices of more than 200 goods and services in 172 cities worldwide.

The survey revealed much of what many around the globe have been feeling for months as the war in Ukraine, ongoing pandemic-related restrictions and inflation have all combined to create a perfect storm of skyrocketing prices for consumers living in major cities.

In 2021, the London-based Economist index found that year-on-year prices for goods and services had risen by an average of 3.5 per cent – a year that witnessed the highest inflation rate in the past five years – while in 2022, that average jumped by nearly five percentage points to 8.1 per cent.

“The war in Ukraine, Western sanctions on Russia and China’s zero-Covid policies have caused supply-chain problems that, combined with rising interest rates and exchange-rate shifts, have resulted in a cost-of-living crisis across the world,” Upasana Dutt, head of worldwide cost of living at EIU, said in a statement when the index was released this week.

“We can clearly see the impact in this year’s index, with the average price rise across the 172 cities in our survey being the strongest we’ve seen in the 20 years for which we have digital data,” she added, highlighting how the rise in the prices of gas in major city centres was a major contributing factor to this uptick, but food, utilities and typical grocery store items were getting increasingly expensive for residents in urban settings as well.

Part of what hurled many cities across the globe into financial distress this year was the soaring US dollar – which is up 18 per cent in 2022 and last month hit a 20-year high, according to the benchmark ICE US Dollar Index, which measures the dollar against a basket of key currencies.

When the US dollar surges, it forces local currencies into weaker positions, adding to the prices of everyday items. And though most Asian cities saw a less steep increase on average – about 4.5 per cent – the case was not the same for poorer countries across the globe.

As the Federal Reserve has raised its benchmark short-term interest a stunning five times over the past year in an effort to stymie inflation, it has weakened currencies in countries like India, where the rupee has dropped nearly 10 per cent against the dollar, and Egypt and Turkey, where the pound and the lira have dropped by 20 per cent and 28 per cent respectively.

That didn’t translate to US cities escaping topping the EIU Index, as New York edged its way up from the number six spot to the top spot overall for the first time and Los Angeles tied for the number four spot with Hong Kong and San Francisco for eighth.

Out of the 172 cities assessed in 2022 by the survey, 22 of them are in the US – including Portland, Boston, Chicago and Charlotte – and every single city surveyed this year experiencing a rise in inflation.

Bottoming out the list for what were ranked as the cheapest cities to live in 2022 were Damascus and Tripoli, while the cities that experienced the biggest shift upward shift were both in Russia (Moscow and St Petersburg) which shot up by “88 and 70 places respectively as prices soared amid Western sanctions and buoyant energy markets supported the rouble”.